We keep hearing about the Trans-Pacific Partnership (TPP) trade agreement and how "great" it is going to be for America or how it is supposed to bring 650,000 jobs to the U.S. House Ways and Means Chairman Paul Ryan (R-WI) keeps telling us over and over again that 95 percent of consumers live outside of our borders. However, we heard these same "facts" with the North American Free Trade Agreement (NAFTA), with permanent trade relations with China (PNTR), with the US-Korea Free Trade Agreement (KORUS) and the Central American Free Trade Agreement (CAFTA) and have seen a completely different outcome.
To start off with, the 95 percent trade illusion that Paul Ryan has painted is a pretty picture, yet only half true. While it is true that Americans make up only 5 percent of the world's population, there is a big difference between consumers and customers. This takes us back to Marketing 101. The term consumer and customer are often used interchangeably, but they are not the same entity. Consumers consume, or use products while customers actually purchase them. A consumer can be a customer and a customer can be a consumer, however there are many circumstances where this is not the case, trade being one of them.
Moreover, 95 percent of consumers live outside our borders, but will they actually be doing much purchasing? There can be billions of potential consumers out there, but can they even afford to purchase and become customers? By simply looking at the facts that the World Bank provides, we can see a resounding no.
- 17.5 percent of the world's population outside of the U.S. lives on $1.25 per day or less
- 18 percent of humanity outside of the U.S. lives on between $1.25 and $2 a day
- Half of the world's population outside of the U.S. has a global median income at $3 to $4 dollars per day
- More than 58 percent of the globe's total workforce makes less daily on the job than the price of a tall Starbucks Frappucccino.
Making free trade agreements with developing countries is not as beneficial as Paul Ryan or President Obama make it seem. They are shoving this fact down American businesses throats, making them think that they will be tapping into a new market, which they will be, however an extremely poor market! Vietnam's minimum wage is 56 cents an hour. How in the world will they be able to afford goods made in the U.S.? They can't. They are potential consumers, however they are not customers. Paul Ryan's argument is only half true and extremely deceiving.
The truth of the matter is that this is subliminally enticing U.S. companies and businesses to outsource their jobs in order to save on production and labor costs. The federal minimum wage in America is $7.25 per hour which is roughly $267.80 a week. Compare that to Malaysia's minimum wage at $297 a month. The average wage for an an engineerin the U.S. is $87,140 but in Malaysia it's $23,484. The average wage for an accountantin the U.S. is $73,670, in Malaysia it's $16,263. The average factory worker salaryin the U.S. is $36,000, in Malaysia it's $19,308.
We can clearly see the huge difference is labor costs between the U.S. and one of the trading partners in the TPP. That isn't mentioning Vietnam, Brunei, Singapore, Peru and Chile who also have low wages in comparison to the U.S.
So how exactly is this going to be "good" for America and American jobs? It's not. We can see this by looking at NAFTA. The North American Free Trade Agreement has been nothing but a disaster for the U.S. Just by taking a look at the auto industry, we see how thousands, if not millions, of auto jobs have been shipped down south. Here in the U.S., the lowest paid autoworkers make $38 an hour with benefits. That is roughly four more times than the average auto worker in Mexico. It is no wonder that Mexico is the most attractive place in North America to build auto factories.
In addition, within the past two years, a whopping 8 automakers have opened plants and expansions in Mexico. Those are jobs that could have supported thousands of families here in the U.S. We were told time after time that NAFTA was going to be amazing for America. Looking at 20 years later, we see that all of these predictions were dead wrong. The Economic Policy Institute estimates a loss of 682,900 jobs to Mexico. That is the complete opposite of Bill Clinton's prediction of the creation of 1 million jobs.
We were fooled with NAFTA in 1994, we were fooled with China in 2001, fooled with CAFTA in 2005, fooled with KORUS in 2012, but we cannot be fooled again with the TPP, TTIP, or TISA. The executive branch is telling us to trust them this time, that the TPP will be good this time. America has been burned one too many times and we cannot afford to run the risk of being burned again!